The cost of childcare is making me second guess having kids. And I’m not the only one

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Forty years ago, I would have been roughly at the age at which the average woman could expect their first child … except, of course, I wasn’t even swimming around back then.

Things have changed since then. I can swim, but I can also walk, talk and think. And the average age for childbirth is about six years older, at 31. But the idea of having a child in a year’s time, or even at 31, seems unthinkable.

The federal government’s new subsidy system has brought about a significant increase in demand for childcare places.

Contrary to my parents’ and grandparents’ ambitions, I’m not especially enticed by the vision of mini Millies running around my non-existent house. But I also struggle to see the financial feasibility. Budgeting for one is already – at times – a precarious effort.

The cost of childcare in Australia has been burning a hole in wallets, especially for parents, for some time, but it also seeps into the consciousness and decisions of the next generation. If I decide to have kids in the future, it will be when I’m certain I can provide for them – and that includes being able to access childcare.

The competition watchdog’s inquiry this year found childcare in Australia was less affordable for households than in most other OECD countries. An average Aussie family with two children under three spent about 16 per cent of its net household annual income on centre-based full-time daycare, compared with the OECD average of 9 per cent.

To be fair, that was before the federal government’s expanded access to childcare subsidies came into effect in July.

But the problem is, the subsidies we have in place don’t fix the root problem. Not only has the Child Care Subsidy been criticised for its complexity (how difficult it is for parents and guardians to accurately compare the out-of-pocket expenses they’ll face with different services) but it also fails to add to the supply of childcare, while piling on the demand.

As we all well know, when supply falls short of demand, prices go up, and we see shortages where people might not even be able to secure a spot in a childcare centre.

That doesn’t mean we should immediately remove the subsidies. Subsidies play an important role for low-income families who may not be able to afford childcare, even when supply is increased and prices begin to drop.

But when it comes to sustainably lowering childcare costs across the board, it needs to be through increasing competition. And again, as we know, when there’s more supply, prices tend to come down because suppliers have to compete harder to win customers.

Childcare centres have raised their fees faster than both broader price increases and wage growth over the past four years, meaning they’ve been ratcheting up a tidy profit. Although demand-side subsidies have offset some of the cost for parents, it’s clear that subsidies are just a Band-Aid solution.

Capping childcare prices might seem like a quick and easy fix. It would certainly stop prices from rising. But it would also fail to add to supply, and come with the side effect of discouraging childcare centre owners from entering or adding supply to the market.

So, how can we bring down prices without worsening the shortage of childcare places?

The least costly solution is making it easier to open new childcare centres by shortening the approvals process. If we’re willing to splurge a little, it could also be worthwhile for the government to allocate more spending to building preschools in areas with high demand. If that’s a touch too far, the government could offer low-interest loans to not-for-profits looking to open a childcare centre. Each of these would help to put more childcare centres on the map.

More government spending is not the most popular solution because the money ultimately comes from taxpayers. But childcare is an investment that pays dividends.

Of course, more childcare centres means we need to retain and add more childcare workers. The recently introduced multi-employer bargaining process has given childcare workers more power when asking for pay rises, potentially helping with retention and attracting new talent.

Affordable childcare means groups that have traditionally been forced to choose between work and raising a child get to do both, or choose out of desire rather than necessity. It’s lower-income earners, and often women, who take on the child-rearing role when the cost of childcare is high. Some prefer to stay home with their kids, but for those who love their work and contribute to the economy, having a child should not spell the end, or a break, in their career.

If we don’t act now to boost supply and shake up the sector with more competition, we’ll continue to fall behind.

Unless the goal is to reduce our birth rate or take more workers out of the workforce, we’re on a sinking ship when it comes to our approach to childcare. For an economy with a declining birthrate and productivity, you would think we’d choose to swim.

Millie Muroi is a business reporter.

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